Wednesday, October 12, 2011

Implementing a direct channel management strategy that wins consumers’ confidence

If there's one article any hotelier in Scotland should take ten minutes to read this week it is I would strongly suggest you consider this one. As hotels the length and breadth of Scotland face up to the end of season cash drain it is more critical than ever that a thought out distribution strategy is put in place ahead of the 2012. This article touches on the importance of direct distribution, flash sales, rate parity and added value.
Maybe hoteliers should read this before giving that two night deal for a tenner to every distribution channel in the world!

Published: 11 Oct 2011 on Eye For Travel by Ritesh Gupta
"One of the best things hotels can do to better manage their distribution costs is just to fully understand what all of the costs are in the first place and what levers they can pull to drive the right mix into their hotel at any given time" says Michael Menis, Vice President - Web and Interactive Marketing, InterContinental Hotels Group (IHG).
InterContinental Hotels Group (IHG) recently introduced what the hotel company described as the “most powerful website guarantee ever by a global travel company”.

IHG is now offering guests a free night if they find a qualifying lower price on any other website. This promise is part of the company’s new initiatives - the launch of `Best Price Guarantee’ and the `Book With Us Advantage’. Any guest who finds a qualifying, lower room price for an IHG hotel elsewhere online will receive their first night free, and the rest of their stay will match the price found. The benefits of the `Best Price Guarantee’ are available at all eight of IHG’s hotel brands.

EyeforTravel’s Ritesh Gupta (italics) spoke to Michael Menis, Vice President - Web and Interactive Marketing, IHG, about this initiative and related issues. Excerpts from the conversation:

The industry has undergone some major and permanent changes in distribution with a lot more transparency across all channels. For its part, IHG has come up with "Most Powerful Website Guarantee Ever”. How do you assess the significance of such move from IHG’s perspective as of today?

We feel as though this is a very significant move on our behalf to educate customers about the value and benefits of booking direct on our websites. Though there is more transparency across all channels, many customers still believe they will get a lower price or a better deal on a third party website, and this new guarantee is our effort to re-educate consumers that they will get the best price, and many other benefits like earning Priority Club Rewards points, when they book direct with us online. We want to show our customers how much we're willing to back up our promise to have the best price guaranteed on our website, which is why we're offering a free night if they find a lower rate through another site online.

How do you assess the approach of hotels’ towards their direct channel management strategy as of today and what do you recommend to them? How can they manage their distribution costs better?
Many of our hotels already do a great job in managing their mix, but other hotels have an opportunity to improve how they are managing that mix. We provide a number of education tools and resources to our hotels to ensure they have the right knowledge to best manage their distribution costs as it is most appropriate for their business and market. There is no one size fits all solution. One of the best things hotels can do to better manage their distribution costs is just to fully understand what all of the costs are in the first place and what levers they can pull to drive the right mix into their hotel at any given time.

What do you recommend when it comes to hoteliers considering their costs and where possible, reallocate those funds to channels that drive more revenue to their hotels? How do you assess the approach for evaluating costs as of today?

Again, there is no one size fits all solution. We provide a number of tools and resources to our hotels to fully understand their costs, their mix, and more. Our goal is to better educate our hoteliers so they have the tools to manage and optimize their business.

The distribution side of the hotel industry is expanding exponentially as new channels have emerged. An effort is being made to address a real imbalance in the hotel purchase process by empowering travellers with better information about the specific rooms in a hotel during the research and shopping phase. What do you make of the efforts pertaining to increasing transparency and personalisation?

We of course want to be as transparent and personal as possible in dealing with our customers, so we see value in many of the new tools emerging. We are closely watching many of the efforts happening in this area, and are exploring and discussing ways it will impact our business and channels in the future. It is still very early on in the scale and adoption of many of these efforts.

Hoteliers acknowledge that there needs to be price parity and rate integrity on retail pricing in both direct and indirect channels. But does price parity really exists in today’s world? There are many instances where OTAs include extras, gift cards or gas cards, on the retail price offered to customers. So while you may see same retail prices on the supplier direct websites and OTA websites, there is clearly a difference in value parity as OTA websites use these extras to convert customers to bookers. How do you assess hoteliers’ concerns?

We think parity does still exist. Part of the importance of the Book With Us Advantage, that we launched along with our new Best Price Guarantee, is to educate customers about the full value of booking direct with us. An example of this is that you can earn Priority Club Rewards points when booking online with us and this is not possible if you book a Holiday Inn via an OTA. We know that many consumers would prefer to deal directly with the business or brand they are dealing with, and sometimes prefer this more than an "extra". Nonetheless, we offer many of the same types of promotions through our brands and direct channels that OTAs offer their customers.

It seems there is an appetite from consumers to always lap up special deals, discounts and special offers. But do you think hotels are in danger of falling into a trap of working with everybody and having discounts all over the place?

In some cases, this is becoming more prevalent and hotels should be smart about what discounts are worth it to provide and when. We know that price is the number one most important thing to a customer when booking a hotel online, but consumers care just as much about the end product they are buying. A discount may get a customer in the door once, but it won't get them to come back if they have a poor experience with a brand or hotel.

IHG has just expanded its relationship with TravelShark. How do you assess options which offer hotels an additional vehicle to be discovered by brand-agnostic, destination-based travel searchers?
This is not something we can speak to at this time.

How do you see the face of online hotel distribution changing in the next 12 months?

As a company we are investing in improving our websites and web value proposition to ensure hotels and customers understand and believe in the value of booking direct with us online. This is what our new Best Price Guarantee and Book With Us Advantage are all about. In the next 12 months customers will continue to have a lot of choices in where they book their travel and we want to make sure they are fully educated and understand their options and what they get from all of them.

A Tourism Matters Three Things To Do This Week Action Plan...
  1. Create your own Best Price Guaranteee and promote it everywhere - your website, emails, bills, Facebook, name badges...
  2. Add value to your own direct bookings - small thing like complimentary tea/coffee at check in, loyalty points, or a gift voucher. Make the difference in value not always price.
  3. Try that price promotion that you're considering running on your own customers - create the package, make it bookable direct only and market the link to your Facebook and email database. Emphasise that's a previous guest "thank you" and see how they respond
If you need help with your online marekting stretegy or need to increase your direct online bookings give us a call on 01292 521404 or email us and we'll see how we can help you in 2012.

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